7/05/2012

News coverage of Unemployment in US and Europe fails to mention how unemployment is defined differently

From an Associated Press article in the Washington Post and Fox News on Monday: 
Eurostat, the EU’s statistics office, said unemployment rose to 11.1 percent in May from 11 percent the previous month. . . . May’s unemployment rate compares badly with an unemployment rate of 8.2 percent in the United States and 4.4 percent in Japan, and is expected to rise further in the coming months as the eurozone economy is forecast to slide back into recession this year. . . .

Here is a headline from the San Jose Mercury News: Think 8.2% unemployment is bad? It's a record 11.1% in Europe.  The exact same headline has also appeared in the Los Angeles Times

The US definition of being unemployed is available at the BLS website.  But note that it is much easier to be defined as unemployed in Europe that the US.
the EU includes those who only study job advertisements as unemployed (if they pass the other screens)—this is true in Canada as well—while the United States does not consider reading ads as active job search. In addition, persons waiting to start a new job are considered unemployed in Europe, but in the United States they are not considered unemployed unless they have actively searched for work within the previous four weeks. . . .
The US BLS does provide adjusted unemployment numbers for some countries based upon how the US defines unemployment.  Take the comparison between the US and Canada, which has been studied fairly extensively.  If you look at the official numbers and ignore that Canada defines its unemployment rate more the way European countries do, it would look like the difference in unemployment rates in April was 0.8 percentage points.  In actuality, the gap was more than twice that, 1.7 percentage points.



In March, for example, the official French unemployment rate was 0.3% below what the BLS calculated the actual rate to be.  The difference for other countries that the BLS can't compare are likely to be much, much greater.  For those interested, the EuroStat EU unemployment data is available here.


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